Compelling evidence has shown that, besides its putative effect on the regulation of the gonadal axis, estradiol (E2) exerts a dichotomic effect on the hypothalamus to regulate food intake and energy expenditure. The anorectic effect of E2 is mainly mediated by its action on the arcuate nucleus (ARC), whereas its effects on brown adipose tissue (BAT) thermogenesis occur in the ventromedial nucleus (VMH). Here, we demonstrate that central E2 decreases hypothalamic ceramide levels and endoplasmic reticulum (ER) stress. Pharmacological or genetic blockade of ceramide synthesis and amelioration of ER stress selectively occurring in the VMH recapitulate the effect of E2, leading to increased BAT thermogenesis, weight loss, and metabolic improvement. These findings demonstrate that E2 regulation of ceramide-induced hypothalamic lipotoxicity and ER stress is an important determinant of energy balance, suggesting that dysregulation of this mechanism may underlie some changes in energy homeostasis seen in females.